Apollo's RegionalCare Said to Plan $800 Million Bond for Merger

RegionalCare Hospital Partners, the medical center operator owned by Apollo Global Management LLC, is planning to raise about $800 million of debt for its merger with Capella Healthcare Inc., according to people with knowledge of the matter.

The offering, which could come next month, may be structured as a secured bond deal, said the people, who asked not to be identified because the information isn’t public. The deal also includes a $350 million unsecured bond that has been privately placed with a group of investors including PSP Investments Credit USA LLC, the lending affiliate of one of Canada’s largest pension funds, the people said.

Financing is being provided by Barclays Plc, Royal Bank of Canada, Deutsche Bank AG, Credit Suisse Group AG and UBS Group AG.

Most of the debt will be used to refinance obligations at both RegionalCare and Capella, with a portion of the proceeds marked for Medical Properties Trust Inc., the real-investment trust that owned Capella, the people said. The new company will have 18 hospitals in 12 states and about $1.7 billion in revenue, according to a March 22 statement.

Funds affiliated with Apollo had agreed to acquire RegionalCare in November from Warburg Pincus. A representative for Apollo declined to comment.

The banks providing the financing are raising bonds as the market for those securities has rebounded faster than the term-loan market, which previously had been the venue of choice for both the hospital chains, the people said.

Sentiment has improved in the U.S. junk-debt market in the last month, with average borrowing costs dropping to about 8.5 percent from as high as 10.2 percent last month, Bank of America Merrill Lynch index data show.

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